Mooching Off the Middle Class

Mooching Off the Middle Class

I normally despise class warfare, but rich freeloaders mooching off the middle class are especially repugnant. You can find them in the nuclear power industry, among other places.

Electricity demand in the United States supposedly faces a dramatic increase in the next 25 years and the Energy Information Administration (EIA) projects a 40 percent electricity usage increase over that time. Many power companies now use that figure to justify what could be a huge comeback for nuclear power.

Utilities have announced plans to request federal licenses in the next two years to build up to 30 reactors, mostly in the South. The filthy truth is that the industry won't build any nuclear power plants unless taxpayers give Wall Street fat cats a risk-free investment opportunity.

Private lenders won't offer a nickel for those plants unless the federal government promises to pay 100 percent of any potential losses, according to Jerry Taylor, senior fellow at the Cato Institute.

The Energy Policy Act of 2005 aimed to provide that for the first six plants built. In executing the legislation's stipulations, however, the Department of Energy discovered the bill technically only required it to guarantee 80 percent. The industry threw a tantrum, crying that no plant construction would happen without 100 percent government coverage.

Old-style electricity regulation guaranteed rates of return on capital, which encouraged people to build, according to Taylor. If you spent $4 billion on a new power plant, the law required that you got all of your money back, regardless of whether people bought your power. The reason California had the highest electricity rates in the nation going into the early 1990s, Taylor said, was due to overbuilt generating capacity.

"Ratepayers were forced to pay for power plants that were only operating 40 or 50 percent of the time," Taylor said, adding that House representatives are already proposing legislation to cover the full 100 percent for nuclear power plants.

"If nuclear power was anywhere near as economically attractive as the industry makes it out to be, we have a riddle," Taylor said. "Why is it they can't convince anybody on Wall Street of that? They're the ones who stand to profit if it is."

Doesn't it seem a mystery why these investors wouldn't jump all over the nuclear opportunity, given the stunning demand predictions? However, the EIA gets much of the data for its projections from the power industry, according to the Union of Concerned Scientists (UCS).

The power industry pitched a similar song and dance about electricity demand increases during the 1970s. Utilities placed numerous orders for more nuclear reactors, which they canceled during the 1980s because those predictions proved false.

Thanks to government handouts, some utilities overbuilt anyway during that time. Do you notice a pattern?

Bad things happen when government funds business that the market rejects. We find ourselves, more than 20 years later, reading stunning predictions of energy demand increases. Once again, power companies will sleep easy with nothing to lose and everything to gain.